The UK launch of the iPhone, at one of Apple’s London retail centers this week, was a far more low key affair than its US counterpart, in keeping with what we see as a less optimistic outcome for the iconic device across Europe, as rivals have had time to line up their answers to the iPhone.
Vodafone this week stole yet more of the thunder of the iPhone launch by announcing its own MusicStation music service along with some top end, music-focused handsets, notably Samsung’s touchscreen SGH-F700V, the 8GB HSDPA version of the Nokia N95, and the Sony Ericsson Walkman 910i.
That came after recent Nokia launches of its own music store and after Sony had closed its Connect music service in order to better support a host of Windows Media compatible music stores with its Walkman phones, MP3 players and potentially its PlayStation Portable.
The iPhone as expected was launched as an exclusive to Telefonica owned operator O2, which is now claiming to be the biggest network in the UK, a claim that Vodafone would be sure to dispute. The handset will sell through retailer Carphone Warehouse giving it 1300 distribution points in the UK, who has promised to have an iPhone expert in every store.
The device will cost £269 ($537) and will have 3 monthly tariffs at either £35, £45 or £55 ($70, $90, $110) each month, with a minimum of 18 months. All of the plans come with capped flat rate data schemes, but the cap is not reached, says O2, unless a user downloads more than 1,400 web pages per day. The big problem here is that most networks offer fully subsidized handsets, because the UK and many Western European countries have a saturated market with more than 1 mobile handset per head of the adult population. Mobile operator strategy in Europe is not about converting non-mobile users to mobile, but getting them to spend more on mobile and to differentiate each operator’s service in order to attract users to switch.
When all the other networks have a handset with touch screen and music, longer battery life with devices fully subsidized, it’s going to be tough to get customers to part with over $500. Jobs told the audience that the iPhone is so much more than a handset, but then again so are the other handsets. And the best portable wi-fi based Google experience is from Sony’s Play Station Portable and that costs £129 ($260).
One thing that will help is that the monthly cost of the iPhone includes free use of UK wi-fi with the Cloud’s network, mostly in pubs and clubs, and one of Europe’s biggest Wi-Fi hotspot operators, with over 7,500 hotspot locations throughout the UK, Germany and Sweden. Of course the device will also work with home and work Wi-Fi systems too, and if Wi-Fi is not available the customer can use a brand new upgrade to the O2 network to Edge. This will apparently set back O2 by quite a few £ millions, despite Edge being a fairly simple software upgrade, described as 2.75G (better than GPRS but not as good as 3G). Edge stands for Enhanced Data rates for GSM Evolution.
O2 says that by the time the iPhone comes on sale on November 9, it will have 30% of its UK network upgraded, which means London, which to our mind is just not enough.
O2 also says that it is setting up a dedicated customer centre to take all the lovely orders that it thinks it will have to deal with, staffed by 1000 agents.
O2 and Apple didn’t say what the terms of their agreement is except that it is a multi-year exclusive.
The first question that the audience wanted answered was why was the iPhone not 3G and when would it be 3G, since most of the European networks are nearing completion of one or other versions of HSDPA, which gives blazing mobile web speeds compared to Edge. While Apple insisted that the reason for this was that 3G chipsets ate too much battery power, most people forgot that the recently announced N81 music phone offers 17 days on standby, 4.5 hours watching video, 5 hours web browsing and 11.5 hours of music playback and is still a 3G phone.
This either means that Apple and its suppliers’ battery technology has not yet caught up with Nokia’s or that it is, as one pundit suggested, the screen that’s eating all the battery power, not the 3G radios.
But Apple insisted that it finds Edge is great for things like Mail and Google Maps, but confesses it is too slow for general web browsing and for that recommends Wi-Fi. The device on Edge would never be able to exceed the flat rate data limit, since it may take up to 20 seconds to download a web page.
The other big issue for Apple and O2 here is that neither have currently made a statement about just how they plan to defend against the process of unlocking the iPhone and using it on other networks.
When the iPod DRM software was broken early in the iPod days, it was a simple matter to load a new version of the iPod algorithms into iTunes and it updated the next time that the device was attached to the PC or Mac. That may not work with iPhones that are unlocked and used on another network.
The legal position is far from clear, with most European regulators pushing for a world where devices in the future must be open and cannot be locked to a single network. Already we know of hundreds of iPhones that have been bought in the US, brought to Europe, unlocked from the AT&T network and are already in use with existing carriers here, many of whom have far better Edge networks than O2.
And if an updated version of the software comes down from iTunes, people will soon learn to not accept the upgrade and leave their iPhones unlocked.
Jobs simply promised to stay ahead of this problem, but gave very few clues how and we have a feeling there will be resulting legal actions if suddenly people lose access to their music collections on devices that are unlocked.
In the meantime Vodafone’s announcement this week shows what other non-iPhone operators think of it all and its reaction has been similar to that of Verizon in the US which joined in with RealNetworks and MTV to offer Rhapsody America.
The MusicStation service will be preloaded onto the Samsung F700V, Nokia N95, and Sony Ericsson Walkman 910i, with the Samsung being the closest Vodafone device to the iPhone. The Nokia N95 music phone can also just as easily allow customers to ignore Music Station and subscribe to the Nokia Music Store without reference to Vodafone.
The F700 is an exclusive for Vodafone for now, and one of several handsets being touted as ‘iPhone killers’ in Europe ‘ in particular, it supports HSDPA and a pull-down Qwerty keyboard, unlike the Apple device.
The Vodafone launch kicks off in the UK and will extend to other Vodafone territories later. But the stakes will be far higher than just wrong footing Apple and its carrier partners ‘ MusicStation is just one aspect of a far wider strategy for Vodafone to offer mobile internet services that can compete on their merits with the phonemakers’ offerings, just as it did in the first generation of mobile data services, by creating the Live! portal and brand rather than merely carrying third party offerings.
MusicStation was created by UK specialist Omnifone and at February’s 3GSM event the company announced that it had signed 23 cellcos, with a combined subscriber base of 690 million in Europe and Asia, to support its framework ‘ reflecting a growing trend for operators to join forces to create content services and frameworks, which helps them keep control of services and fight off the internet giants. Omnifone now says 30 cellcos are on board, though Telenor is the only one, before now, to go live. Omnifone also claims partnerships with operators in Australia, Belgium, Czech Republic, France, Germany, Greece, Hong Kong, Hungary, Ireland, Italy, Netherlands, New Zealand, Philippines, Poland, Portugal, Romania, Singapore, South Africa, Spain, Sweden, Turkey and the UK, but Vodafone is the first major to go live and will be seeking first mover advantage as well as control over the future development of the system.
On the content side, Omnifone says it is working with ‘the world’s major music labels’ as well as independents, and now has 1 million tracks from Sony BMG Music Entertainment, Universal Music Group, EMI Music and Warner Music, among others.
The service works by letting users search, download and play music on their cellphones and sync it with their PCs to create playlists, which can then be shared with other MusicStation users. The offering is compatible with 75% of handsets that are already on the market and can be downloaded directly to the mobile phone, even if it doesn’t include a music player. Unlike the iPhone, the music is stored centrally, so if a phone is lost or stolen, there is no need to repurchase the tracks.
Aware of the importance of building brand quickly in online services, the operators have put aside their usual insistence on their own branding and will all use the MusicStation name and look and feel.
Vodafone’s UK launch will offer unlimited music downloads for £1.99 ($4) a week. The timing ‘ pitching against the upcoming European launch of iPhone ‘ was certainly no accident, and Vodafone CEO Arun Sarin reinforced the point when he told UK newspapers ‘The iPhone is a 2G phone, not 3G. When it’s a broadband phone we will be interested in carrying it.’
The MusicStation service will be accessed through the Vodafone Live! portal and charged on the customer’s Vodafone bill. Tracks are downloaded over the air and subscribers will also be able to create a profile to receive relevant music news and updates and share tracks with other MusicStation users. Vodafone won’t initially allow users to copy downloaded tunes to other devices such as PCs, and this facility will be offered as a premium service for an additional fee. At Telenor this facility is free.
Longer term, there is speculation over whether Vodafone could seek to strengthen its own-branded music services by adopting the Rhapsody platform being pushed in the US by its joint venture partner Verizon.
Apple and T-Mobile then followed up the Tuesday announcement with a Wednesday one saying the exclusive German carrier will be T-Mobile.
By the end of 2007, T-Mobile will be the only network operator in Germany to offer EDGE throughout its GSM network and iPhone customers will also have access to the 8,600 T-Mobile hotspots in Germany. Pricing was €399, more or less the same as the UK.